In June this year, the Financial Stability Board’s (FSB’S)Task Force on Climate-related Financial Disclosures (TCFD) published its recommendations on how the corporate sector should disclose climate risk to investors. The FSB apparently regards climate change as a systemic financial risk, as articulated in a speech by the governor of the Bank of England, Mark Carney, in 2015. Meanwhile, at ExxonMobil’s annual general meeting in May this year, a majority of shareholders demanded that the oil and gas giant discloses its thinking on climate risk more clearly.
Data, analysis and advice on climate risk to portfolios have been around and available to investors for at least 20 years. By the late 1990s, the UN Environment Program (UNEP) Financial Initiative was messaging regularly on the risk of climate-change-induced weather events to the insurance sector and hence the wider markets.
In 2000, the investor-enabled Climate Disclosure Project (CDP) began collecting and aggregating carbon emissions information from thousands of companies around the globe. Financial data sets such as MSCI, Thomson Reuters Eikon and Bloomberg create and sell climate-related metrics on companies as part of their environment, social and governance (ESG) offering.
These observations beg two questions. Is climate risk now going mainstream in portfolio assessment? If so, what has changed?